By Chris Dieterich
Stocks cruised higher in a quiet session that saw investors
brush off a weak reading on economic growth in the first three
months of 2014.
The Dow Jones Industrial Average climbed 54 points, or 0.3%, to
16686, near the day's highs in late-afternoon trading. The blue
chips were on pace for their fifth advance in six sessions and
approached their May 13 all-time high of 16715.44.
The S&P 500 index rose, on pace to eclipse Tuesday's record
high, gaining nine points, or 0.5%, to 1919. The Nasdaq Composite
Index added 20 points, or 0.5%, to 4244.
Major indexes traded in a narrow band in below-average volume
after the second estimate of first-quarter U.S. gross domestic
product showed the economy contracted at a seasonally adjusted 1%,
more than expected. Investors shrugged off the report, saying that
it reiterated what is already known: the economy was sluggish in
the first three months of 2014, in large part because of harsh
winter weather.
Traders said the latest GDP report does little to change the
monetary-policy trajectory of the Federal Reserve, which is
reducing its bond purchases but remains committed to keeping
interest rates low for an extended period.
"Volumes are beyond anemic," said Dave Rovelli, managing
director of equity trading at Canaccord Genuity. "There's no reason
to sell stocks if the Fed is going to be on your side."
Nine of the S&P 500's 10 sectors rose, with shares of
companies in the materials and consumer-staple sectors leading the
way.
Tyson Foods rose 6.1%, leading the S&P 500, after entering
the bidding for Hillshire Brands, which jumped 18%. Tyson offered
to buy the maker of Jimmy Dean sausage and Ball Park hot dogs for
about $6.1 billion. The fresh bid comes just two days after
Pilgrim's Pride, down 1.3%, revealed an unsolicited offer for
Hillshire worth about $5.5 billion. Earlier this month, Hillshire
moved forward with a $4.6 billion deal to acquire Pinnacle Foods,
which gained 1.1%.
In keeping with recent market action, price gains in shares of
large companies outpaced those in smaller ones. The Russell 2000
Index of small-cap stocks rose 0.3%.
Government economists had previously estimated that GDP, the
broadest measure of goods and services produced across the U.S.,
slowed to a 0.1% growth rate in the first quarter.
"People are dismissing some of the weakness and expecting that
there is going to be strength in the future," said to Brian
Jacobsen, chief portfolio strategist at Wells Fargo Funds
Management, which manages about $242 billion.
"It's not about what was; it's about what will happen. A lot of
what will happen will be driven by central bank policies," he
said.
Anastasia Amoroso, global market strategist at J.P. Morgan
Funds, which oversees about $400 billion, was similarly unmoved by
the weak economic reading, which she likened to "looking in the
rearview mirror."
Rather, she is focused on more recent economic data that has
shown signs of improvement as stocks grind higher.
Jobless claims in the week ended May 24 fell more than expected
and remained near prerecession levels, according to the Labor
Department. The number of Americans filing claims for new jobless
benefits fell by 27,000 to a seasonally adjusted 300,000, versus an
expected decline to 319,000.
"The trend is starting to reverse and, all in all, the data is
adding up to a stronger second quarter," Ms. Amoroso said.
A separate report on pending home sales for April rose 0.4%,
below expectations for a gain of 2%.
The yield on the 10-year Treasury note rose to 2.445% from
2.440% late Wednesday.
The Stoxx Europe 600 gained 0.1%. Traders positioned for next
week's European Central Bank monetary-policy decision. The central
bank is widely anticipated to announce new stimulus measures on
June 5.
Asian markets were little changed. Japan's Nikkei Stock Average
rose 0.1%, while China's Shanghai Composite eased 0.5%. Crude-oil
futures added 1% to $103.75 a barrel, while gold futures lost 0.3%
to $1,255.70 a troy ounce.
The dollar fell against the euro and the yen.
In U.S. corporate news, Apple rose 1.7% after it confirmed late
Wednesday that it would buy headphone and audio software company
Beats Electronics and subscription streaming music service Beats
Music for a combined $3 billion.
Costco Wholesale slipped 0.1% after the bulk retailer said its
quarterly profit rose 3% from a year earlier, but missed
expectations.
Abercrombie & Fitch rose 6% after the teen retailer's
quarterly loss widened, though not as much as expected.
Palo Alto Networks rose 5.3% after the cybersecurity company
late Wednesday said its quarterly profit and revenue topped
estimates. The company also announced it had settled litigation
with Juniper Networks Inc. over a patent dispute.
Sanderson Farms added 2.6% after the meat processor's quarterly
profit more than doubled, topping estimates, in part because feed
costs declined from a year earlier.
Intercept Pharmaceuticals rose 4% after the U.S. Food and Drug
Administration granted fast-track status to its lead product
candidate for hard-to-treat cases of an autoimmune liver
disease.
Tilly's tumbled 16% after the teen retailer late Wednesday
posted weaker sales and higher expenses in its most recent
quarter.
Write to Chris Dieterich at chris.dieterich@wsj.com